Signs on window advertise a bitcoin ATM machine that has been installed in a Waves Coffee House in Vancouver, British Columbia.

Canadian officials have been pretty quiet in the bitcoin debate, but the government’s stance became clearer on Thursday.

Canada doesn’t consider bitcoin to be legal tender, a government official said, putting a question mark over the use of the increasingly popular virtual currency here.

“Only Canadian bank notes and coins are recognized as legal tender in Canada. Bitcoin digital ‘currency’ is not legal tender in Canada,” an official from Canada’s finance department said in an emailed statement.

The official declined to comment on whether the government plans to license money exchanges that would convert bitcoins for real currency such as the Canadian dollar.

The Canadian government, along with regulators including the central bank and the Office of the Superintendent of Financial Institutions, will continue to monitor developments involving virtual currencies, the official added.

Financial-stability considerations are what would prompt the Bank of Canada to take a greater interest in bitcoins and other alternative means of payment, said Alexandre Deslongchamps, spokesman for the Bank of Canada.

“Smaller, stand-alone payment systems for which there are many substitutes – like bitcoin — should generally require much less intensive oversight and regulation because they pose much less risk to the Canadian financial system as a whole,” Mr. Deslongchamps said. “Nevertheless, these payment systems should be designed and operated to meet the needs of Canadians which would include convenience and ease of use, price, reliability, safety, and effective redress mechanisms.”

A spokesman for the Financial Transactions and Reports Analysis Centre of Canada, the regulator that licenses Canadian-operated foreign exchange businesses, declined to comment.

Bitcoin was launched in late 2008 by a mysterious person named Satoshi Nakamoto or group of people who have never been formally identified. It is digitally “mined” by computers, which obtain it by completing a complicated mathematical problem.

Earlier Thursday, bitcoin was trading at $859.03, according to Coindesk’s Bitcoin index, but soared as high as $1,165.90 in late November. Its volatility has raised questions about its viability as a legitimate form of currency.

Other countries have voiced caution about bitcoin and its risks. The Bank of France said last month that did not recognize bitcoin as legal tender, warning that the virtual currency “represents a clear financial risk for those that hold it.”

Chinese authorities have taken a more hardline approach, banning the cryptocurrency from being used by third-party payment service providers. That action sent the value of bitcoin plummeting.

Meanwhile, some U.S. officials appear to have warmed to bitcoin. Former Federal Reserve Chairman Ben Bernanke said that bitcoin “may hold long-term promise, particularly if the innovations promote a faster, more secure, and more efficient payment system,” while a Congressional hearing in November found that the currency was a “legitimate” financial service.

There are roughly 100 business in Canada that accept bitcoin as a form of payment, according to CoinMap, a website that tracks bitcoin usage around the world.

Earlier this week, Canada’s second bitcoin ATM was launched in Toronto, allowing customers to exchange the currency for the Canadian dollar and vice-versa. There is another bitcoin ATM in Vancouver.

“Canada seems to be leading the way in bitcoin in the technology space, said Anthony Di Iorio, executive director of the Bitcoin Alliance of Canada, which manages the Toronto ATM.

About Canada Real Time

Canada Real Time provides insight and analysis into what’s making news in Canada, a country punching above its weight on the world stage thanks to its vast resources and strong banking sector. Drawing on the expertise of The Wall Street Journal and Dow Jones Newswires, we take a look at developments in fields ranging from business to politics to culture. You can contact the editors at canadaeditors@dowjones.com